Introduction: Discovering whether tax audit applies to you is essential for business owners. Let’s break down the criteria and calculations step by step for clarity and accuracy.
A. Criteria for Business Owners:
1. Gross Receipts or Turnover:
- Does your Gross Receipts or Turnover exceed Rs. 10 Crore?
- If Yes, Tax Audit is applicable.
- If No, proceed to the next question.
2. Cash Receipts and Expenses:
- Are your Cash Receipts exceeding 5% of Gross Receipts?
- Or, are expenses paid in cash exceeding 5% of total expenses?
- If Yes, move to the next question.
3. Adjusted Limit for Cash Transactions:
- If the answer to Q-2 is Yes, consider a limit of Rs. 1 crore instead of Rs. 10 Crore.
- If Yes, Tax Audit is applicable.
B. Inclusion of Income from Futures and Options:
1. In the above case for the purpose of calculation of Turnover Add the Favourable Positions (Profit) as well as Unfavourable Positions (Loss). The Value so derived will be considered as Turnover. For Example:
| Transactions | Buy | Sell | Realised P&L |
|---|---|---|---|
| I | 5000 | 6000 | 1000 |
| II | 7000 | 5000 | -2000 |
| III | 6000 | 5000 | -1000 |
As per the above example, Turnover of Future transaction would be = 1000+2000+1000= 4000
C. Is your income include income from Options?
1. In the above case for the purpose of calculation of Turnover of Option Transaction, add the premium obtained on selling the options to the absolute profit. The Value so derived will be considered as Turnover. For Example :
| Transactions | Premium Received | Profit and Loss |
|---|---|---|
| I | 500 | -6000 |
| II | 400 | 5000 |
| III | 600 | -5000 |
As per the above example, Turnover of Future transaction would be = 500+6000+400+5000+600+5000= 17,500.
Conclusion: Understanding whether tax audit is applicable requires considering Gross Receipts, Cash Transactions, and Income from Futures and Options. Follow the steps to determine your situation accurately and seek professional advice if needed.
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